Automatic compensation for customers with energy switching problems - proposals

Energy companies will have to automatically compensate consumers who suffer problems while switching supplier under proposals announced by the regulator.

Ofgem said consumers would receive at least £30 in compensation for each switching problem they experience under the plans to boost protection and confidence in the process.

It said the compensation was intended to cover problems such as consumers being mistakenly switched to another supplier, known as an "erroneous transfer", or switches taking longer than 21 days to complete.

Automatic payouts could also be triggered by suppliers who are late to send final bills or refunding credit balances to customers who are leaving.

Ofgem said the new rules would give "peace of mind" to consumers that they will be compensated if something goes wrong when they switch and should also serve as a wake up call for suppliers to reduce the number of problems and boost consumers' confidence in switching.

The proposals follow research by Ofgem that found many people are put off switching because of concerns something may go wrong, especially if they have experienced a problem before.

It said that while the vast majority of switches go smoothly, more problems are occurring as an increasing number of people switch to get a better deal.

Last year, 5.1 million electricity consumers and 4.1 million gas consumers in total switched supplier, the highest number for almost a decade.

In February, Ofgem approved a programme to overhaul industry systems by 2020 to allow people to switch by the next working day and reduce the number of switches which go wrong.

It said automatic compensation should be in place by the end of this year.

Rob Salter-Church, interim executive director of consumers and markets at Ofgem, said: "While the vast majority of switches go smoothly, too many problems are still occurring. These can cause inconvenience, and in some cases, real worry and stress for those affected.

"Today's proposals for automatic compensation will strengthen protection for consumers who switch, and should serve as an incentive for suppliers to get switches right first time."